• 2023.03.15
  • Labor

Dismissal and recommendation of resignation of employees

Points to keep in mind when dismissing an employee

A company may expect its employees to contribute to the company’s performance by motivating them and having them concentrate on their duties. In reality, however, there are many problems that may force the company to consider terminating an employee.

The employee is grossly incompetent.
-The employee has committed misconduct, such as embezzling company cash
-The employee’s cooperation is seriously lacking
-The employee has a problem in his/her personal life due to gambling, etc.
-Disobedience to instructions and orders of superiors
-If the employee causes damage to the company by disclosing confidential information to a rival company, etc.

When considering dismissal, it is necessary to first confirm whether or not such a fact exists, and even if such a fact is believed to exist, whether or not there is evidence to prove it. If the employee admits the fact, the fact that he/she has confessed to the existence of the illegal act itself is a major piece of evidence (the confession must be in writing and signed and sealed by the employee in order to be considered objective evidence). In addition, it is also necessary to consider whether or not the confession constitutes grounds for ordinary or disciplinary dismissal, assuming such facts exist. Since the grounds for ordinary or disciplinary dismissal are stipulated in the employment regulations, it is necessary to check which article of the employment regulations applies to which grounds. If the employment regulations do not state the grounds for dismissal, it does not mean that the employee cannot be dismissed. However, the company must prove the objectivity and reasonableness of the dismissal, such as violation of laws and ordinances.

Types of Dismissal

There are several types of dismissal under the Labor Law. The requirements and procedures for dismissal differ depending on the type of dismissal.

Ordinary Dismissal

Ordinary dismissal is stipulated in Article 16 of the Labor Contract Law and is considered invalid if (i) it lacks objectively reasonable grounds and (ii) it is not deemed reasonable under socially accepted conventions. For example, if an employee loses the ability to work due to an injury and is unable to perform his/her job, he/she is no longer able to fulfill his/her obligation to provide labor, so it is highly likely that the dismissal will be deemed objectively reasonable and reasonable under socially accepted ideas. Of course, there are various restrictions (termination restrictions) under the Labor Standards Law regarding the employee’s injury or illness, so it is necessary to consider these restrictions as well. If the employee’s ability to do the job is extremely poor, it may be considered a disciplinary dismissal depending on the provisions of the employment regulations, but if there are no provisions in the employment regulations, it will probably be an ordinary dismissal. The degree to which the employee’s work ability is significantly inferior will be determined based on past precedents. For example, there is a case in which a dismissal of a cab driver whose average sales were only one-fifth of those of a regular employee over a long period of time was found to be valid. In the management of a company, dismissal may be considered in many cases, such as when an employee is hired as an Internet security technician but has little knowledge or experience in Internet security.

Dismissal for liquidation

Dismissal for liquidation is a dismissal for the purpose of liquidation when a company is facing financial difficulties and cannot continue to exist without dismissing employees. The Supreme Court has set forth four requirements for dismissal for the purpose of reorganization, and these four requirements are still used as the criteria for judgment.

(i) Necessity of personnel reduction
(ii) Obligation to make efforts to avoid dismissal
(iii) Reasonableness of personnel selection
(iv) Reasonableness of the procedure

For (i) the necessity of personnel reduction, it must be shown by objective figures that the company is in economic hardship and that it cannot continue to exist unless it conducts layoffs. The obligation to make efforts to avoid dismissal in (ii) requires that dismissal is necessary even after maximum efforts are made to avoid dismissal through reassignment, secondment, solicitation of voluntary retirement, and other measures. The reasonableness of the selection of personnel in (iii) is determined by whether the selection of persons to be dismissed is not arbitrary but objectively reasonable. The reasonableness of the procedure in (iv) is judged based on whether or not careful explanation and negotiation with the labor union and workers were made. In recent years, there have been cases in which a company does not conduct a dismissal due to a flood of applicants for resignation by offering a premium severance payment. However, this can also be said to indicate that the company can afford to pay the premium severance pay.

Disciplinary Dismissal

Disciplinary dismissal is permitted when an employee has caused damage to the company by committing an act that falls within the grounds for disciplinary dismissal stipulated in the employment regulations. Since disciplinary dismissal has an extremely large impact on the employee and is likely to result in litigation, the company must carefully consider (i) whether the disciplinary action is objectively reasonable and (ii) whether it is socially acceptable and reasonable in light of the nature and manner of the employee’s conduct and other circumstances (Article 15 of the Labor Contract Law). In other words, the company is required to determine, based on objective evidence, whether or not the conduct constitutes grounds for disciplinary dismissal (fact finding), and also whether or not it is objectively reasonable and socially acceptable to determine that the conduct constitutes grounds for disciplinary dismissal (legal evaluation). In addition, in the case of disciplinary dismissal, it is necessary to implement the procedures stipulated in the employment regulations (due process and due process issues), so, for example, if there is a provision for a prize and punishment committee, it is necessary to hold a prize and punishment committee meeting to make a decision on disciplinary dismissal (in addition, if a prize and punishment committee meeting is held, it is necessary to confirm whether said committee meeting is an advisory body or a decision-making body). The notice of dismissal must state the reasons for the dismissal, and reasons for dismissal not stated in the notice of dismissal cannot be added at a later date. However, since a disciplinary dismissal can be made as many times as necessary, if there is a possibility that the original dismissal will be invalidated, a preliminary dismissal for a different reason may be issued (preliminary dismissal).

Resignation by agreement

In the case of a disciplinary dismissal, it is likely that severance pay will not be provided. For the employee, whether or not the dismissal constitutes a disciplinary dismissal can make a big difference in whether or not he or she is entitled to severance pay. Considering the possibility of a court case or other disputes that could result from a disciplinary dismissal, the company may prefer to have the employee agree to voluntarily resign from the company in exchange for severance pay.
In many cases, a settlement is reached in which the employee agrees to resign in exchange for severance pay. Even in cases where there are grounds for disciplinary action, the company may discuss the possibility of voluntary resignation if there is room for discussion with the parties concerned, rather than immediately dismissing the employee for disciplinary reasons. In addition, at the time of resignation by agreement, a non-competition and confidentiality obligation may be added to the resignation agreement, which may also provide for the reservation of damages in the event of a breach of such obligation.

Recommendation of resignation

A resignation recommendation is a recommendation from the company to the employee to consider voluntary resignation. If the recommendation is coercive, it is the same as a severance action, so it must be a recommendation for voluntary resignation on the part of the employee. It is highly likely that the employee will accept the recommendation on the condition that he or she will receive the full amount of severance pay.